What is the 50/30/20 rule?
- 50% needs: rent or mortgage, utilities, groceries, insurance, transportation, minimum debt payments.
- 30% wants: eating out, streaming, travel, hobbies, shopping.
- 20% savings: emergency fund, retirement, extra debt payments.
With $4,000 a month of take-home pay, that is $2,000 for needs, $1,200 for wants and $800 for savings, or $9,600 a year.
When it does not fit
In expensive cities, needs can take 60% or more. That is fine: start with what you can save, even 5%, and raise it each time your income goes up. If you want a detailed plan by category, use the family budget calculator.